A Limited Liability Partnership is like a duck billed platypus. A duck billed platypus is a bit of every animal. Likewise, a Limited Liability Partnership (LLP) shares many of the features of a normal partnership, blended with that of a company.
Moreover, it also offers reduced personal responsibility for business debts. However, unlike members of ordinary partnerships, the LLP itself is responsible for any debts that it runs up, not the individual partners. The main difference is that an LLP has the organisational flexibility of a partnership and is taxed as a partnership. In other respects it is very similar to a private company.
You can set up a limited partnership to run your business.
You’ll need to:
- Firstly, choose a name
- Secondly, have a registered address that acts as your principal place of business
- Thirdly, appoint general and limited partners
- Finally, register with Companies House
For a Limited Liability Partnership there must be at least one ‘general partner’ and one ‘limited partner’ – a partner can be an individual or a company.
What type of partner you are makes a difference to:
- your liability for the partnership’s debts
- your responsibilities
You can’t be a general and a limited partner at the same time.
All partners are equally responsible for any debts or obligations until the partnership has been registered.
As a limited partner you:
- Contribute an amount of money or property to the business when it’s set up
- Are only liable for debts up to the amount you’ve contributed
- Can’t manage the business
- Can’t remove your original contribution
As a general partner:
- Firstly, you are liable for any debts the business can’t pay
- Secondly, you control and manage the business
- Thirdly, you can make binding’ decisions for your business
- Firstly, register your LLP with Companies House
- Secondly, register the business for Self Assessment . Also register separately as an individual
- Thirdly, register the business for VAT if sales exceed the threshold.
- act for the business if it’s wound up and dissolved
With a Limited Liability Partnership you may have to send accounts to Companies House if the general partner is a limited company.
Characteristics of Partnerships
A partnership helps individuals spread risks in many ways
- Decisions can be taken with the benefit of input from at least two persons
- A broader perspective can be taken of the issues concerned.
- The business can tap into more financial resources
- Bigger, established partnerships may be able to get funding, not normally available to a sole trader.
Most partnerships have a spread of skills and abilities not available to sole traders. There is less likelihood of business failure due to illness or other inability to work. Check out our vlog on Tips for effective business partnerships
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